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NPC & CPPCC Sessions 2006

 GD Provincial People's Congress & CPPCC annual Sessions

Chinese Premier Wen Jiabao pledged Sunday that China will firmly press ahead with the shareholding reform of state-owned commercial banks, reiterating keeping a controlling share in the state's hands.

The premier made the remark in his report on government work, delivered Sunday at the opening ceremony of the Fourth Session of China's Tenth National People's Congress (NPC), the top legislature.

"We will introduce advanced foreign management practices, standardize corporate governance, improve internal control and management, and promote structural innovations," Wen said.

"The premier's statements show the state's resolve to overhaul the state-owned banks," said Hu Pingxi, president of the Bank of China's Shanghai branch, adding that premier's report also rebuts the doubt that Chinese state-owned banks are facing the risk of being sold cheaply while introducing overseas investors.

China will not convert the reform directions for its commercial banks, said Cao Honghui, with Financial Institute of the Chinese Academy of Social Sciences, "Yet the government should be ready to tackle problems appearing during the course of the reforms."

In the new five-year development blueprint delivered Sunday, China's banks are expected to streamline their operation, upgrade their internal control and reduce the banks' non-performing loans and banking irregularities so as to ensure the basic capital and continue their shareholding reform.

The China Construction Bank (CCB) went public in Hong Kong last October, the first among the country's Big Four state-owned banks to seek overseas stock market listing.

Two other Chinese banking giants, the Industrial and Commercial Bank of China Corporation (ICBC) and the Bank of China (BOC) have already been set for overseas cooperators and are expected to go public this year.

The government will launch the share-holding reforms of the Agricultural Bank of China (ABC) this year, the premier said in his government report.

keeping a controlling share in the state's hands is crucial for the big four banks, namely ICBC, BOC, CCB and ABC, to operate in a sound way, which will enable them to have a relatively stable shareholding structure, independent decision-making capacity and stable management mechanism, said Qin Chijiang, an NPC deputy, noting that the four banks are playing important role on the financial market as they account for about 70 percent of the country's financial business volume.

It is a tough task for China's banks to shift into "commercial banks in real sense," Zhou Xiaochuan, governor of the People's Bank of China, the central bank, said in a previous address.

Going public will prompt the banks to speed up their reforms, Zhou said, noting that "There is still a long way to go after public listings."

China promised to fully open its banking industry to foreign competition by late 2006 under commitments made as a part of its entry into the World Trade Organization.

Hu Pingxi, also an NPC deputy, said the aim of state-owned banks' going public is not just for funds, but also for transparency in operation, enhancing competition capability with overseas rivals, introducing supervision systems and streamline internal control.

By the end of 2005, 25 foreign investors are reported to have taken stakes in 20 Chinese banks.

A senior official with China's financial department said in a previous statement that the introducing overseas strategic investors in state-owned banks will not pose threats to financial security, but will help them to operate healthily.

Editor: Yan